Pilgrim's Pride Corporation

Good morning and welcome to the second quarter of 2025 Programme Stride on the Conscience Call and Webcast. All participants will be in the listening mode. Should you need assistance, please signal and conscience specialist by pressing the star key followed by 0. At the company's request, this call is being recorded. Please note that the slides referenced during the previous call are available for download from the Invest Affection of the company's website at .pillgrims.com. After today's presentation, there will be an opportunity to ask questions. I would now like to turn the Conscience Call over to Andrew Rogeski, Head of Strategy, Investing Relations and Sustainability for Pillsgrim's PAD. Please go ahead.

Good morning and thank you for joining us today as we review our operating and financial results for the second quarter ended on June 29, 2025. Yesterday I put in a leadership press release providing an overview of our financial performance for the quarter, including a reconciliation of any non-GAP measures we may discuss. A copy of the release is available on our website at .pillgrims.com along with slides for reference. These items also have been filed as form 8 page and are available online at SEC.gov. Fabio Sandri, President and Chief Executive Officer and Matt Galioni, Chief Financial Officer, will present on today's call. Before we begin our prepared remarks, I would like to remind everyone of our safe harbor disclaimer. Today's call may contain certain forward-looking statements that represent our outlook and current expectations as of the day of this release. Other additional factors not anticipated by management may cause actual results to differ materially from those projected in the forward-looking statements. Further information concerning these factors has been provided in yesterday's press release, our form 10-K and our regular filings with the SEC. I would now like to turn the call over to Fabio Sandri.

Thank you, Andy. Good morning everyone and thank you for joining us today. For the second quarter of 2025, we reported net revenues of 4.8 billion, a .3% increase over the same quarter last year. Our adjusted EBITDA was 687 million, up .7% versus Q2 of 2024. Our adjusted EBITDA margin was .4% in line with last year. Our performance reflects our commitment to our values, disciplined execution of our strategies, and extensive application of our management metrics. In the US, our diversified fresh portfolio across segments benefited from favorable commodity clear house values, continued affordability of choosing compared to other fruitings, strong key customer demand, and sustained progress in operational excellence. Diversification efforts through prepared, accelerated, as our branded offerings continue to drive growth across retail and for service. Our euro business rose margin expansion through realization of cost efficiencies in manufacturing and optimization of product mix. Safe to key customers rose faster than channel averages, and our branded offerings in fleet raiders and rollover continue to grow, further diversifying our portfolio. Mexico shows strong results, giving attractive fundamentals in the commodity market, extensive growth with key customers, and continued momentum of branded offerings in fresh and prepared. Given the strong demand, along with our vision of becoming the best and most respected, we are pleased to announce the initial wave of investments to further unlock our growth potential. We have also announced a special dividend of approximately $500 million. As a result, we can continue to create better features for our team members, bolster our competitors' advantages, and further unlock value for our shareholders. Time to supply in the US, the USDA indicated relatively quick production for the US chicken that grew .9% compared to the second quarter of 2024, from increased headcount and higher than average driveway. Despite an increase in excess with a more productive layer flock, cheap placements continue to be challenged as hatchability remains at historical low levels and hatcher utilization continues at record rates. As such, production growth was driven by increased light weight and improved livability during the later half of the quarter, expanding production by the 1.9%. Considering the most recent sets and placements data, the USDA estimates growth of .5% in 2025, suggesting sufficient supply to meet strong chicken demand experienced in recent orders. As for overall protein availability, the USDA anticipates .3% for 2025 growth, as increased chicken and pork production offset significant declines in beef production. As for demand, the cost of eating out continues to increase more rapidly than eating at home. As such, retail propels further growth for chicken. In fresh, both tenders and wings gain traction, whereas boneless chicken's dress continues to grow, giving continued record spread against ground beef. Momentum for boneless thighs continues as it grew faster than all cuts compared to prior years. Similar to fresh, both the deli and frozen department also had a demand at a sustainable rate. Frozen fully cooked led chicken growth across all of detail primarily through increased velocity, whereas deli benefited from increased distribution and demand for wings. In food service, the increase in the cost of eating out impacted restaurant traffic, especially for food service restaurants. However, chicken demand grew as operators strategically lean into value offerings, limited price production, promotion, and menu revisions to either trigger or maintain momentum. Value-added chicken focus QSR continues to leverage the affordability of chicken, outperforming the broader dining sector and capturing traffic and share. In exports, broiler volume continues to lag previous years. Nonetheless, pricing remains resilient as domestic demand for dark meat continues to be healthy. Given the relatively minimal outbreak of high-fat agent influenza, many of our trading partners continue to ease or remove trading restrictions on several major poultry producing subspace, increasing the access. While opportunities arise from trade restrictions from the outbreak of high-fat AI in Brazil, the overall impact was muted as export markets quickly adjusted to different policies and restrictions across countries. Our trading partners continue to navigate tariffs. To date, there have been no significant disruptions other than China. We anticipate potential benefits to U.S. chicken when a trade agreement is reached between these countries. Turning to feed, corn pricing moved lower throughout the quarter, as the U.S. saw a large rebound in plain third-A bridge. As a result, the USDA forecasted a record high in U.S. corn production, along with a re-use in domestic stocks. When combined with increased production from Brazil, the USDA expects global corn stocks to be relatively flat here on the world rear. Soybean meal pricing also moves lower, as records found American production drove a sharp rise in global soybean stocks. When combined with increased soybean processing capacity for biofuels worldwide, meal prices have become further depressed. In wheat, global stocks, including China, are expecting a slight rebuild this crop year, as production was close to or above initial expectations in all major northern hemispheres. In the UK alone, output increased by 12% compared to prior years. As a result, increased production is expected to offset slightly lower beginning stocks. Since ample supply exists and is more readily available at the point of origin, risks related to physical supply of wheat have been reduced. Throughout the remaining of the year, grain and oil seed markets will take direction based on U.S. weather, anything packed on corn and soy crop yields, along with any possible disruptions related to ongoing trade negotiations. In the US, consumers continue to seek value in their eating occasions. As such, the relative affordability, availability, and flexibility of chicken compared to the other proteins continue to resonate across both retail and food service channels. Given the environment, kids rarely experience strong demand as consumers increasingly migrated towards retail to stress their budgets. This strength was amplified by record stress between boneless, skinless breasts and ground beef pricing. Nonetheless, our differentiated portfolio continued to gain traction as our sales to key customers grew significantly higher than industry averages. In the US, the performance of our branded transfer of fresh operating was particularly strong as net sales rose nearly 20% compared to prior years. In small births, overall margins remained strong as our business benefited from an extensive demand from key customers in USR. In Delhi, wind velocity improved, but we experienced some reduction in the growth of rotisserie birds, impacting prices to a lower level than 2024, but still close to the historical 5-year average. We are working in new innovation to help growth with our key customers on this category. In big birds, jumbo cut-out values remained favorable despite volatility in the quarter. During the first two months, value were second highest on record. After a rapid decline in June, values returned to normal life levels consistent with the 5-year averages. Nevertheless, our team remained focused on operational excellence as youth and labor efficiency both improved. Given our progress in constructive market conditions, profitability increased significantly compared to prior years. Pre-pairs continue to realize significant growth as net sales increased by 20% compared to last year. In retail, just bear recently achieved over 10% market share given incremental distribution and category leading velocity. Pilgrim's momentum also continues to build as trials of loss increase throughout the quarter. Both brands continue to receive industry recognition for innovation and consumer preference. Just bear achieved the number one ranking in Flitano's 2024 product-based sector list, whereas Pilgrims received the People Magazine's 2025 Food Award for Best Chicken Market for our cheesy jalapeno offering. Prepare Foods also continues to drive profitable growth through incremental distribution, portfolio expansion and vended offerings in Pilgrims and Gold Case brands. As such, sales grew over 25% compared to last year. More importantly, substantial opportunities remain with leading distributors, selected USRs and schools. Commerce also continues to be a growth driver as digitally enabled sales rose over 26% compared to last year through continued expansion and efficiency of leading investments with leading retailers, food service providers and various online platforms. Turning to Europe, the environment improved as consumer sentiment grew as rates of space inflation. Within retail, overall demand remained steady across the proteins, with poultry and chur meals experiencing the highest growth, while land and pork were the most challenged. Given this environment, our team continues to drive profitable growth through our strategies. As such, we strengthen key customer relationships through incremental distribution and new product development, generating sales growth that helps pace the overall grocery channel. Our diversification through key brands in retail also continues to progress. Rollover grew over 10% compared to last year from additional distributions and new offerings. -to-lazer also continues to market place momentum as net sales growth surpassed the category average. Innovation remains a key pillar to drive growth. During the quarter, our higher-activity differentiated chicken offerings, developed for a key customer, was recognized as the best new poultry products by food management today. We continue to cultivate our new product pipeline. As such, we've extended our rollover portfolio into chicken, created additional eating occasions for fried fridge raisers to pass again, and worked in close collaboration with the key customers to create a series of premium new epic meal offerings. These items and several others are created for launching Q3 and will be supported by investment in media and promotions to foster growth. Food service remains challenging as total visits fell compared to prior years. We additionally secure awards from our customers, increasing our sales in the channel by 10% versus last year. Moving forward, we will look to further cultivate our presence with food operations within the pubs and bars category. Our integration of corporate support activities and optimization of our manufacturing network are nearing completion. Based on these efforts, we have improved production efficiency and created a more agile, key customer-focused organization. Given our enhanced foundation, we will look to accelerate opportunities to drive profitable growth. Mexico experienced another strong quarter, as commodity fundamentals in the live and retail markets remain attractive, given its analysis, reduced availability of imports, and volume growth. In fresh, key customer relationships strengthen, as net sales increase double digits, driven by the food service rotisserie channel. Our retail fresh branded portfolio also continues to drive diversification, and sales have increased over 6% compared to last year, led by Just There, which is over 2.5 times. Our diversification efforts to value-added have experienced similar success, as prepared continued to grow. In retail, pilgrims' demand increased double digits compared to last year. Growth in the food service was driven by QSR, which were up nearly 10% versus prior years. During our investor day in March, we highlighted a variety of projects to reinforce our strategies and enhance our competitive advantage. As part of this, we announced an investment of $400 million last year to build a new foodie cook prepared food plant in Walker County, Georgia. Given this investment, we can further capitalize on long-term growth trends for chicken in retail and food service. Prepare is a large category, with an estimated size of $14 billion, and a track-six growth profile also exists as net sales have grown annually by 6% since 2019. Furthermore, consumer interest appears to be accelerating, as sales have risen by 7% between the first half of 2024 and 2025. During the same period, our net sales have grown 21%. Momentum for our retail brand has also been remarkably strong. Over the past five years, household penetration has increased from .4% to 10%. Similar momentum exists in food service for our brands, as gold case volume has risen 15% annually since 2021. When our growth prospects are combined with strong consumer enthusiasm for our brands, we have a remarkable opportunity to accelerate the expansion of our prepare food system. This investment will further diversify our portfolio, reduce reliance on outside growth by suppliers, and leverage our fresh production capabilities. As a result, we can drive growth, enhance margins, and reduce volatility across our entire U.S. business. In the meantime, we will expand foodie cook production in our existing prepare facilities at Morefield and Rayco. Given these investments, we will still expect to have sufficient capacity to meet our growing demand across retail and food service. Within retail, over one-third of fresh chicken is sold as antibiotic-free or organic chicken. Given extensive consumer interest, our case-ready business has become the leading provider of these higher attributed, differentiated offerings. To further strengthen our competitive advantage, and reinforce our leadership position, we have announced the conversion of a Big Bird point to support key customer growth to an NIE and veg-fed program in the case-ready segment. We make communities to diversify across world sizes, and our ability to capture markets up-side in the Big Bird commodity market. As such, we view the manufacturing footprint, and identify opportunities to enhance our mix and unlock additional capacity to meet our growth in the -in-bed segment. Given these efforts, we can maintain our current portfolio across all bird sizes, further increasing our upside potential while limiting downside risk. Equally important, we can generate higher, more consistent margins in the low- to mid-level digits for our U.S. fresh food. In Mexico, our capacity extension efforts also continue. Our projects in Vera Cruz and Merida remain on schedule, and we still anticipate this will become operational in the first half of 2026. Similarly, our prepared expansion continues to proceed as planned, and initial production is slated for the beginning of 2026. Given this work, we can continue to drive sales growth and reduce volatility of results. When all these products are at full capacity, we will increase the size of our business in Mexico by 20%. We remain committed to the other key projects and potential strategic acquisitions that are discussed during our investor day. As such, we will continue to evaluate various alternatives and provide the space when available. With that, I would like to ask our CFO, Mark Valvanoni, to discuss our financial results. Thank you, Fabio. Good morning,

everyone. For the second quarter of 2025, net revenue was $4.76 billion versus $4.56 billion a year ago, with adjusted EBITDA of $689 million and a margin of 14.4%, compared to $656.9 million and a .4% margin as well in Q2 last year. Adjusted EBITDA margins in Q2 were .1% in the U.S., compared to .7% a year ago. For our Europe business, adjusted EBITDA margins came in at .2% for Q2, compared to .4% last year. In Mexico, adjusted EBITDA margin in Q2 was .3% versus .4% a year ago. U.S. net revenue for $2.82 billion versus $2.66 billion a year ago, a nearly 6% increase. Adjusted EBITDA on U.S. for Q2 came in at $482.7 million, compared to $444.6 million a year ago. Strengthened the commodity chicken markets, along with moderate grain input costs, and continued operational improvement, so strong -over-year profitability improvement in our -the-art business. Our taste-ready and prepared food businesses have continued their momentum with increased distribution with key customers. Taste-ready profitability improved -over-year, however, even with increased sales volume, higher commodity chicken input costs was a headwind compared to its profitability. Small birds performance in QSR has been very strong, up and in a more challenging pricing environment than it was. In our U.S. gap results, we did incur legal settlement expenses of $58 million in the quarter, primarily due to reaching settlements with certain parties associated with the ongoing global arts litigation. In Europe, adjusted EBITDA on Q2 was $111.8 million versus $96.2 million last year. The business has benefited from its continued structural reorganization, including integration of support functions and manufacturing and optimization programs, while cultivating key customer partnership with continued innovative offers. As we begin to wind down our reorganization efforts, restructuring charges trended lower to $3.5 million during the course. Mexico generated $92.3 million in adjusted EBITDA on Q2 compared to $115.1 million last year. The Mexican business continued to demonstrate its strengths with adjusted EBITDA margins greater than 16%, even though facing -over-year effects headwinds of 13% in versus-e challenges during the quarter. SQA costs in the quarter were lower -over-year, primarily due to a decrease in the previously mentioned legal settlement costs. Also in the quarter, we incurred marketing investment costs and additional incentive compensation expense based on the progress of our -to-date results. Our effective tax rate for the quarter was $25.1%. We continue to anticipate that the full year effective tax rate will approximate 25%. We have a strong balance sheet, and we continue to emphasize track loads from operating activities, management of working capital, and disciplined investment in high-return projects. During Q2, we reduced our gross leverage by $90 million through open market purchases of our own debt. Even though the attainment of the $1.5 billion special dividend in April, our net debt totaled less than $2.3 billion with a leverage ratio of less than one time our last 12 months adjusted EBITDA at the end of the quarter. Following the April dividend payment and debt repercussions during this period, we had over $1.9 billion in total cash and available credit at the end of the quarter. We have no short-term immediate cash requirements for our bonds and churns between 2031 and 2034, and our U.S. credit facility does not expire until 2028. With the strength of our recruiting positions, the Pilgrim's Board yesterday declared a special dividend of $2.10 per share, or approximately $500 million. The record date for the dividend will be August 20, 2025, with a payment date of September 3, 2025. When adjusting for this dividend, our net leverage ratio was 1.15 times adjusted EBITDA, still well below our target of between 2 to 3 times. Net interest expense for the quarter totaled $31.5 million. With the announcement of the upcoming dividend, we anticipate our all-year net interest expense key between $115 and $125 million this year. As discussed in yesterday's March and demonstrated by our announcement last week of our new U.S. prepared food plant in Guapatown, Georgia, we will continue to invest in growth. We are very excited to move forward in Georgia and that this project will trade over 630 jobs and will expand our brand of prepared food capacity beginning in the first half of 2027. Upon reaching full capacity of this new plant, we estimate that U.S. prepared food business will increase its net sales by over 40% from its current levels. We spent $161 million of cash backs in the second quarter, an increase of $63 million in the first quarter. In the U.S., we made progress towards the conversion of our Westinville plant to support a retail key customer in the first quarter of 2026. Also, in Mexico, our investment in growth and prepared continued progress may not schedule. Once these projects finalize and are at full-out utilization, we estimate the Mexican business will increase its net sales by approximately 20% from its current levels. These projects and prepared foods case-ready in Mexico, taken together, require approximately $650 million in incremental growth capital. We will continue to ramp up capital spending throughout this year to support these various projects. However, we anticipate total capital spending in 2025 to be slightly less than or originally less than $750 million, likely closer to $650-700 million. These near-term growth projects align for overall strategies for solar diversification, focus on key customers, operational excellence, and a commitment to key member health and safety. Operator, this concludes our prepared remarks. Please go to the call for questions.

Thank you. We will now begin the question and answer session. In the interest of allowing equal access, request that you limit the questions to two, then rejoin the queue for any follow-up. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys to minimize background noise. To withdraw your question, please press star, then 2. At this time, we will pause momentarily

to assemble our roster. The first question comes from Ben Turner

from Boxpress. Please go ahead.

Good morning, Fabian. Thanks for taking my question in Congress on another very strong quarter. So, the first one, actually, just following up on some of your closing comments right now, Matt, in terms of the CAPEX, ALOPE, and so on. I just wanted to clarify the investment in Georgia that you've announced last week. So, how should we think about the spend of the $400 million that's going to ramp up in somewhat of the second half, and then probably going to go higher in 2027? So, the bulk of it, I guess, will be in 2026, CAPEX. But just to understand a little bit the cadence of those $400 million associated to this investment, is that using chicken that you already produce, or does it include additional chicken slaughter capacity just on that one? And then I have a quick follow-up question.

Sure. Thanks, Matt. Good morning. I think, when you think about that $400 million that we announced last week, I think this year, kind of in that $50 to $70 million range, next year it's going to be $250 to $300 million if we reach the end of 2027. I thought timing can fluctuate a little bit. The vast majority of the spend will be in 2026, because we anticipate this becoming up and running in the first half of 2027. So, I'll give you that as my kind of basis, and then Fabian, I'll talk about the chicken side of it.

Yeah, Ben, thank you for the question. As we mentioned, we want to improve our portfolio by increasing our presence in the preparations and branding arena. And I think this time is in time to support us in the growth of our Just Bear brand. The Just Bear brand is a differentiated trend. It is known to have a very minimally processed. And as we mentioned, it has experienced phenomenal growth. And since it used no-waste -sand-by meat, and we are the largest producer of no-waste -sand-by meat in the United States, it would be normal for us to support these prepared foods with our internal production. But of course, in all of our prepared foods, we operate as an independent business. We have independent P&Ls. We actually have independent P&Ls by plant. But the prepared food business is operated as an independent business. And it can support meat from any supplier, as long as it is in line with our superior quality standards.

Okay, got it. And just, I mean, in general, you've highlighted in your prepared remarks that some of the production data is, I mean, it's not a big supply. It seems like that particularly the Big Bird rate, the birds with Big Birds, the Big Birds are gaining a lot of share. So obviously, there's a number of boosts to the supply side here. So if you look at the supply or demand situation, and maybe putting that beef shortage aside for a moment, are we getting to the point that there's coming too much supply on because now all these aspects as of a sudden do turn into chicken placement, what we have that rate gain and we're getting a little bit of an oversupply situation here, or just not yet because of the demand for chicken being pissed off?

Yeah, I think that's a great point. I think when we go and step back and look at the expectations for supply of chicken Q3, I think we continue to see the same structure as we saw last year and this year. So we have a lower layer of flock, but it's more productive because it's younger. So we're seeing more egg sets. And we've been seeing this throughout 2024 and 2025, but we're still with the hash ability issue and 2025 has actually been lower than 2024. We always have an improvement because of seasonality and the weather pattern, and we have an improvement hash ability that's lower than we had last year, but it's still below the 2024 levels that were already record low. So because of that, even with an increase in the egg set, the chicken placement has not followed. But as we mentioned, we always have also an improvement in the mobility in this period of the year because once again of the weather, this translated to close to 1% increase in head counts. I think because of the possibility of the changes, we are seeing an increase, especially in the big bird segment. And that increase in that segment accounted for 1% increase in live waste. So that's why we saw 2% increase, close to 2% increase in the overall availability of meat for the domestic market. If you look at the demand and you look at what's happening in both retail that is gaining market share because of the breathing increases in inflation and the concerns of the consumers about spending, retail was increasing by 2.4%. And on the food service, despite the reduction in the traffic, we're seeing chicken gaining market share and increasing manpower penetration to the accounts that we increase the sales of chicken in the food service by 2.7%. So when you look at that increase in demand on every mention, all the challenges in pricing and availability of the other proteins, I think the expectation increase of USDA of close to .5% for the year, it's in line with the demand. And I think that's what we've seen lately on the prices of boneless grass meat.

Perfect. Thank you very much, Ovi. I'll pop it on.

The next question comes from Andrew Salvet from BMO Capital. Please go ahead.

Thank you,

Martin. Thanks for taking the questions. I wanted to ask another US chicken supply chain question. We've seen pull-ups price are down over the last three or four months and that comes on the heels of what was an extended period of pretty consistent increases. So, you know, is there something changing there or what is driving the reversal? Maybe you can kind of talk through what the dynamics are at play there and more broadly, can you give us an update on the industry production constraints and where the industry stands with those now versus maybe a year ago or so? Thanks.

Thank you, Andrew. Yeah, like I mentioned on the structure of the industry and any right on pull-up placements, I think what the industry is trying to have is a more productive block. I think the hash ability issue has been very impactful. If you look at the hash utilization, we're at the highest level ever. And I think we'll probably test the capacity. I think all the hashers are operating more days than they should, reducing a little bit the maintenance. So, if you have eggs that do not hash or a lower productive layer, you're in trouble because you're compromising the bottleneck, which is the hasher. So that's why the industry is trying to get a more productive and younger layer block. And it's all from there in terms of the capacity of the industry to increase production. And I think what the industry is trying is to gain production through the library. And I think that is what creating this higher growth on the Big Bird segment. It is our industry way of trying to expand production without being able to expand the number of eggs that we are producing. And I think on the overall, it's also matching with the demand for chicken. When you look at bite segments as well, we're seeing the boning category being more challenge in growth than the Big Bird category. I think we always mention about the versatility of chicken. Both in retail and food service, it's not only the center of the plate, but it's also as an ingredient. And I think the Big Bird breast meat is a perfect match to as an ingredient. At the same time, we're also seeing more the boning of the dark meat. I think we've been talking for this for many years about the change in demographics and the change in tasting in the domestic market, US market. We used to be in the past white only, white meat only market, exporting the black workers. But over the last five to ten years, we saw a significant growth in the dark meat consumption. Today, at retail, boneless thighs are the same price as boneless breast. So you can see that there is a strong demand for the boneless thighs in the retail. And that is helping the Big Bird category as well, as we are being able to de-bone the black workers and gaining a

better value than exporting black workers.

That's super helpful. And then switching gears to Europe, I'm curious how you're thinking about the margin progression from here. You had been expecting a slower pace of your margin expansion. And we didn't see that this quarter, but sequentially it was only up very slightly. And so I guess, you know, what caused that slower pace of sequential margin improvement? And are you expecting to see that reaccelerate over the rest of the year sequentially to get to kind of a steady year over year improvement? And I know I'm mixing sequential in Europe here, but I'm trying to get a sense for how to think about the improvement in EU margins from here over the back half of the year.

Thanks. We always have a little bit more seasonality in Europe, and typically the second finaster is better, is Q4 being much stronger than the first finaster. What's happening in Europe is that we saw the consumer sentiment improved a little, but it's still at the lower level. And we saw the growth of grocery really limited in this quarter. There was a significant increase in the cost of living in Europe because of the increase in the national security cost for companies. And that impacted a little bit to both the consumer sentiment and the demand. But nonetheless, we saw chicken continue to be the fastest growing category in there. We saw a little bit of reduced demand in the land and pork categories, which are more expensive than chicken. But going forward, we continue to see the improvement of our operations through the consolidation of our back office and our operational network. And here we are continuing to see more innovation. And I think that's the most important point for Europe. We will continue to innovate to help our key customers to grow faster than category averages. But to your point, there is always a seasonality in Europe, and Q2 typically is superior or better than the first semester, with Q4 being the strongest of all.

Got it. Okay. Thank you very much. The next question comes from Pudan Sharma from Houston. Please go ahead. Congrats on the quarter. I appreciate the question here.

Just wanted to first start out, and sorry to belabor the point on the egg set here, but you mentioned earlier on that we're masked out in egg sets. And just looking at the data, there was a pretty big jump from the start of 2024 to 2025. I think we went from like 240 million a week to about 250 million a week. So I just wanted to get a sense of, you know, how much more growth do you think we can see in egg sets without seeing any major investment in any sort of hatchery capacity?

Yeah, thank you. It is really hard for us to get any more egg sets or chick plates, right, if we don't have investments in hatchery capacity. And as I mentioned, what the industry is trying to have is a younger layer flock that is also more productive but has better hatchability. Because to my point, if the bottleneck in our industry is the hatch, we were not being able to capture all the demands of the sky that we are seeing with production. When you're looking to the numbers, in Q3, we are seeing a boost expected from USDA close to .9% as well, together with what we have as of today. So I think we'll be pretty much in balance in terms of supply and demand. But you're right, the issue for us continues. I think we always have this question, why do we have the hatchability back, right? And I think what we're seeing year over year is that the hatchability has not improved. That there is some seasonality, so we always see some improvements during the summertime. And I think it continues to be the challenge that we have dealing with this new breed. And as we mentioned, until a new breed comes, and we haven't seen any evidence of a new breed coming, this is the best breed in terms of performance, in terms of feed conversion, and in terms of yield. So there is actually no intention on our industry to go back to older breeds that are less productive, just to get a better hatch. So I think we will continue to reach this struggle with this. We're learning how to manage the better, especially the male. It is once again an animal that gains weight, and then managing the live parts is very difficult. But I think we'll get some improvements, and we'll get hatchability improvements here and there over time, which will allow our industry to get in line

with the strong demand that we are seeing. Appreciate the color there. Just as a follow-up,

and on that, the egg set and just the supply, I think fall to wintertime is when you typically see seasonal production cuts by the industry. But in your comments earlier, when you talked about USDA being up, their estimates being up 1.5%, that being an adequate level of demand, I was wondering if you think that the industry will need to see deeper production cuts than they enacted last year, or do you think production cuts will be at a similar pace to what we saw last year? We'd love to get your thoughts around those seasonal production cuts.

I think it's the normal seasonality of our industry, right? You have seasonal cuts for the two, for every mole. There is the Thanksgiving, which is, and Christmas, which we see a lot of demand for turkey, for ham, for other types of meat. And we see a decrease in the promotional activity of chicken and fish, which will lead to lower demand, as expected. I think it's the normal seasonality here over the year, and there is the normal seasonal cuts from our industry. So, we will always match our production to the demand of our key customers, and as we saw the numbers that we discussed with them, what are their promotional activities, we will support those plans, as we do every year. I think during Q3 and Q4, we are also seeing that there will be even higher challenges on beef and pork. I think we're expecting, our USDA is expecting a sharp reduction in production of beef and pork. And there has been some issues with the live operation of pork, where we're seeing the PD virus impacting some of the operations. There is a discussion about weights and heads in the pork, but we're seeing that Q4, in terms of availability of postal meat for the United States, will be close to 1%, which is one of the lowest numbers we've seen. Which tends to benefit the demand for chicken, but as I mentioned, it is normal to see a reduction in

the demand

for

chicken during Q4. Appreciate the call. The next question comes from Gularime Pilaris from

Santander. Please go ahead.

Thank you, everyone. Thank you for taking the question. That's a quick one. You reported a 5% growth in the U.S. with a 1% growth in the world. If you could go through a bit of the main drivers here, and going forward, looking at all the discussions that we're having about visas and the situation of labor in the U.S., what could you expect moving forward in terms of wage inflation and the fact that they are in the first place and further where they're not?

Yeah, I think that's something that we've been looking closely, right, on the labor market in the United States. Our strategy has been to follow, of course, all the policies from the United States. We saw some humanitarian visits being revocated in the United States, especially for Nicaragua, Venezuela, Cuba, Haiti. We had some employees with those visas, and because of the revocation, we had change from those team members. Our strategy has been to over-staff our clients during Q2 to prepare for those potential impacts in the labor market, and that's how it's been operating. In Q2, despite one of the best turnovers we ever had, I think we always have a policy of being competitive in the marketplace. We are inserted. We have a process where we look plant by plant and region by region, and we are competitively of ages in those regions. We've been able to fully staff our clients, actually, during Q2 to prepare for those actions by the government. We were over-staffing our clients, so we won, as a number, at 105% staff. We control the staffing in every single plant. We have great methods to perfectly to the needs that we are aiming, and during Q2, we were 105% staffed, especially to prepare for those impacts. So far, we've been able to fully staff our clients, like I mentioned. We are running the best mix that we can, and that's what we saw in the performance during this quarter. As far as going in the future on labor inflation, I think what the numbers we are seeing for the entire United States is that has not been a significant issue. Of course, we need to wait and see how the economy continues to go. We are seeing some resuscitation labor in the food service arena, and we're benefiting from that. Like I mentioned, we are very competitive where we have our clients.

That's a good clear comment. Thank you. The next question comes from Heather Jones from Heather Jones Research. Please go ahead.

Good morning. Thanks for the question. I wanted to go back to the Walker plant and how you all are going to be supplying that. And it looks like the majority of the slaughter plants that are located around that area are small bird. I think there's some larger ones, I guess, in Alabama. I guess my question is, are you planning on converting maybe from small bird capacity, particularly given the demand dynamics in that segment? Are you planning on converting to capacity, or would you pull it from plants that are further away? Just hoping, wondering if you could give us more insight on that.

Yeah, I think we're always looking for the portfolio, right, Heather? What is the segment that is growing? What is the segment that is more challenging? As I mentioned, I think the boning category has been the one that has been challenged over the last period of time. We are the leader in that category. We have great key customers. We saw some of these key customers in the food service arena growing much faster than the category averages. So we're seeing great profitability in those plants. Nonetheless, we see that the market that is growing is more for us, the cage-ready and the big bird segments. And as always, we will adjust our portfolio to what we look, and not only the right now impact, but also looking going forward. I think when you look at where we are growing, we are growing in retail ahead of the category in the fresh, more than five times what the industry grew. We actually improved way ahead of the category average once again because of the differentiated offerings that we have. So it's not only the region, it is about the offerings that we have. We have the no-antibiotic feather offerings, we have the veggie-fed offerings, we have the organic offerings. So it's more about the area of work rather than just the region.

And I think that there is, you know, Bobby was mentioning before, well, it's a short-reparaged food business. They really do look and source from multiple places. They'll sort of look internally from our own plants, but they also source quite a bit outside of programs facilities too. So they really are making sure that data, that cost profile and so, sorting of the plants in Walker County will come from a variety of different places.

Okay, but y'all are the largest, you said that's going to be NAE and y'all are the largest supplier of NAE, largest producer of NAE in the U.S.?

Correct.

Okay, and for years you guys have said in the U.S. your target was a third, a third, a third. And clearly there's some changes going on, pretty big changes. So I was wondering if you could maybe not definitively, but sort of qualitatively give us an update of thoughts on what does that ideal mix look like now for you guys in the U.S.? Yeah, I think

like Anash, we're always looking at what you mentioned in terms of the portfolio, right? And when you look at the market, it is kind of a third, a third, a third, with the big bird growing faster than the other segments. On the small birds, as I mentioned, the challenges on the boning category, but we are also seeing the food service for small birds, especially on the TSRs, we talk about the sandwich, right, for many years. And that is another thing that we can do, increase a little bit the live weight on the small bird category to support the growth in the food service, both distribution and TSR on the small birds. So we still believe that being a balanced approach, it is the right approach. As we mentioned, we are growing faster in retail because of our differentiated offerings and because of our key customers growing faster than the categories, and we need to convert one big bird plant to a cage-ready plant. And we are finding bottlenecks in all of our big bird plants so we can continue to have the balanced approach without losing our exposure to the commodity markets that we know are very strong right

now. Thank you so much. The next question comes from Peter

Galbo from Tango Jamaica. Please go ahead.

Hey guys, good morning. Question for you on Mexico specifically in the quarter and then as we kind of bridge to the second half. I just want to understand how we should kind of think about the profitability there. It seems like at least in 2Q, FX obviously was a pretty material drag on the revenue side, but you also got a pretty sizable benefit on the cost side. So just now that the currency is going the other way, how we should think about the impact that could have on profitability amongst market dynamics in Mexico for 2H?

Sure, thank you Peter. Yeah, as we mentioned Mexico is a volatile market quarter over quarter, but year over year when we look it's pretty stable and it's a double digit market because it's a growing economy and as the consumers get more available income, they increase their diets and chicken is the most affordable way of increasing the protein diet. We saw some volatility in the live market in Mexico during the quarter and I think not only on the demand side, but on the supply side. We saw some increase in diseases during this quarter in the live market and we have these small operators that will come and go as the live market is strong or weak, which we always mention amplifies the volatility in the live market in Mexico. So because of the diseases impacted the companies get lower, let's say, bio-security, these small players were impacted and that created a small reduction in the supply during this quarter, which increased prices in the live market. So the live market was actually the most profitable segment in Mexico during this quarter. Going forward, again we continue to execute our strategy of growing in Mexico as I mentioned, we are extending our Merida production or extending our production to the peninsula in the Merida. We are expanding our production in Veracruz to support the live markets and the small bird markets and we're also expanding our prepared food operation in Mexico that is growing double digits to further diversify the portfolio and reduce a little bit the volatility of results in the region. With all those projects are at full speed, we expect our operations in Mexico to be 20% higher than what we have today.

And in computer, just a compliment, what Fabio said, the volatility of the FX, you had mentioned, I had mentioned in my prepared remarks, the 13% head-end that we saw a year over year in the quarter. When we look at Q3, of course we cannot predict where the piece will go for the rest of the quarter, but where it sits right now versus where the average was in Q3 of last year, it's 8 AM par. So we really at this point don't see a little bit of FX impact one way or the other at this very stage for Q3 of 2025. And

I'm giving the FX, FX also impacted a lot of the grains in Mexico is imported from the United States, so FX was actually a benefit. But on the other hand, there is a big export of meat from the United States to Mexico. 20% of the exports of US are to Mexico. So it's an important market for specially like quarters, but also some boneless breasts. And I think the FX will create the American meat to be a little more expensive in Mexico, which creates the opportunity for our Mexican operations.

Okay, thanks for that guys. And then maybe just to pivot, obviously the special dividend now, a second quarter in a row, which I think this one was maybe a bit more of a surprise than the last one. Just Fabio, like a change in capital allocation philosophy, you know, like this is pretty abnormal, I guess, to do two in one year, it's going to be about $2 billion at least at this point. So I just want to understand if there's been a change in how the board views capital allocation, how the relationship with the parent company has changed as you contemplate kind of another round special dividend. Thanks very much.

Sure, I don't think there's been any change. We're always looking to create shareholder value, right? And as you mentioned, and as we discussed in our investment day, we have several avenues of growth in our business. So we're always looking for acquisitions, of course, we're looking to grow our prepared food brands and to diversify the geographies where we're in. I think as we're seeing multiples and some of the acquisitions a little bit more difficult, especially in the United States, we engage in organic growth. And that's why we announced the new plant for prepared food, again, to grow and diversify the portfolio. And we are growing in multiple and we're looking for opportunities in Europe as well. So I think that avenue of growth will continue. In the meantime, I think the business has been really strong, we are discussing the results, right? And I think we've been increasing our cash and that position is not efficient for us. Matt mentioned that we are below one-time leverage and we always have the target of being two to three times. And with the expectations that we have for the rest of the year and strong cash flow generations that we had, once again, we got to a position where our balance sheet is out of where we think is optimal. And we decided to do this special dividend. We will continue to do this special dividend. So then we believe that our leverage ratio is getting to a place that is not the optimal capital for us. We also have share buybacks, potential share buybacks that we discussed. We have bond purchases that we discussed. And I think we're always looking for all the alternatives to

create shareholder value. Thank you. The next question comes from Kia Odhikoptha

with Boxit. Please go ahead.

Thank you. Good morning. Thank you for speaking here. Actually, I would love to just follow up on that very last point that you made. With regards to the bond purchases, you know, we were just commenting and Fabio, you mentioned as well how you're under levered you are versus the target. So could you walk us through why you guys have been utilizing open market on repurchases given that there really isn't any immediate need to reduce your debt

balance? I think, yeah, I agree with Matt. I think really it's just been more opportunistic. I think that we disclosed in the 10Q that, you know, the board, we discussed it towards the end of the first quarter. They just gave us more of an authorization to continue to repurchase as we deem appropriate. I think at the time we just found that there has been some availability, you know, the market was good and we could buy when we felt it was the right price. I just take more opportunistic than anything else. Not a huge number of dollars, you know, and you've got authorization to do more, but with the dividends here, a little bit more of a pivot on that one, I think, going forward than what we did here in Q2.

That's helpful. And so just on the Interfix Funds guidance, is it fair to assume that the increase relative to what you talked about before is being driven by the lower cash balance or is there anything else going on?

Absolutely correct. It's the lower cash balance. You know, we are, you know, we'll say our growth Interfix Funds is actually coming down a little bit because of the buyback to the debt that we were just talking about, but the cash balance will be lower and that interest, you know, the assumed interest income will be lower just with the dividend to be paid here in the beginning of September.

Okay. And then just one final question on the Mexico CapEx piece. You talked about the $650 million in aggregate. Can you just remind us how to think about the cadence of that year by year? When are we going to hit the $650 in total and what we should be thinking about for that piece for this year and next year?

When we're thinking about the $650, you know, in general, you know, that number really included Mexico, Walker County, the new preparedness plan and also our conversion of Rockville that Lisa was talking about. So where we're at with 2025 is somewhere, you know, in that 200-ish to 25 range, you know, 2026 in the 350 and then the kind of residual in 2027. But you do understand that Mexico and Rockville will be completed here. You know, the days we were talking about, Rockville will really be finished here in the first quarter of 2026 and most of Mexico will be done in the first half of 2026. The Walker County, you know, we talked about opening the plans in the first half of 2027. Some of that track

a little dread, of

course, in that.

Okay. That's very helpful. Thank you.

Thank you. This concludes the question and answer session. I would like to turn the conference over to Fabio Sanchi for any closing comments.

Thank you everyone for attending today's call. In the second quarter of 2025, we achieved strong operational and financial performance. As such, I would like to thank our team members for their continued discipline and ownership of our values, strategies and methods. Given the solid foundation, we can continue to make investments to grow our campus, strengthening our competitive advantages, enhancing margins and reducing volatility of results. These efforts must continue with a relentless focus on team members' safety and well-being. As a result, we can achieve our vision to be the best and most respected company in our industry, creating a better future for our team members. I look forward to accelerating our efforts during the second half of

2025 and beyond. Thank you everyone.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.